Posts tagged with: layoffs

In any period of economic transition there are upheavals at various levels, and winners and losers (at least in the short term). We live in just such an age today in North America, as we move from an industrial to a post-industrial information and service economy, from isolationism to increased globalization. There’s no doubt that there have been some industries and regions that have been more directly affected than others (both positively and negatively).

Michigan, for example, has been one of the most manufacturing-rich states in the nation for the last century, and has been running record unemployment numbers for the last decade or so, as manufacturers move to more friendly economic environments, both within the US and without. Not least of these factors contributing to Michigan’s competitive disadvantage is the high labor costs associated with a labor union-laden state.

The perception that manufacturing workers are simply being left behind in the new economy is pervasive, such that popular opinion is shifting away from free trade. As Fortune magazine reports, “A large majority – 68% – of those surveyed in a new Fortune poll says America’s trading partners are benefiting the most from free trade, not the U.S. That sense of victimhood is changing America’s attitude about doing business with the world.”

As an aside, this is a perception that doesn’t quite match up with the typical caricature of globalization. After all, how can both America (as the “imperial” dominator) and the developing world (as the exploited poor) both be made worse off by international trade?

If it were truly the case that global trade weren’t mutually beneficial, that would be one thing. What’s visible on news reports everyday are the layoffs, buyouts, and unemployment levels in the US. What isn’t always so visible is the extent to which Americans depend on the low prices associated with many imported goods. One group you might think should know better than the average American about such complexities are professional economists. (more…)

Last night the President spoke of “the challenge of entitlements” and said that “Social Security and Medicare and Medicaid are commitments of conscience — and so it is our duty to keep them permanently sound.”

“With enough good sense and good will, you and I can fix Medicare and Medicaid — and save Social Security,” he averred. The ability of the federal government to negotiate drug prices has been an aspect of the recent debate over Medicare that was brought to the fore in the recent “100 hours” legislative agenda.

A number of conservative commentators have come out against this idea, including Acton’s own Rev. Jerry Zandstra and Benjamin Zycher of the Manhattan Institute (HT: The Reform Club). These are just two voices in a chorus of criticism rising against federal negotiation (I use them just because they are the ones with which I’m most familiar. I don’t mean to pick on anyone in particular).

Both of their arguments seem to me to boil down to this: the government is an effective negotiator and the result of negotiation will be that drug companies will have less money coming in and therefore spending on research and development will suffer.

Zandstra says of successful negotiation, “if, in doing so, you dry up research and development dollars so you aren’t developing drugs to treat cancer and Alzheimer’s and other diseases — if you take the profit motivation away — have you done good? No, you really haven’t.”

Zycher writes, “Federal price negotiations will cause sharp price reductions, but this will yield less research and development investment in new and improved medicines over time.”

These claims fail at a number of points in my opinion. Zycher and Zandstra are probably right on the mere claim that federal negotiation of drug prices will produce a drop in pharma income. But that isn’t the datum that is most relevant to the policy discussion.

Once government has decided to tax us and spend our money on a particular program, I think it is government’s responsibility to spend that money as well as it can, to be good stewards of efficient and productive use of those funds. This is true regardless of whether or not the program itself is one that government should be undertaking. The question of whether the government should be doing or pursuing a particular program or agenda is a different one than whether the government should pursue these programs efficiently and well.

So, given that Medicare is an entitlement to which our government has committed itself, it seems to me that the government is responsble for administering it as cost-effectively as possible. The government needs to make our tax dollars stretch as far as they can. This should include negotiating lower prices paid for prescription drugs, regardless of the effect it might have on drug company profits or research budgets.

It is a separate question whether drug companies need federal support to achieve the current or higher levels of funding for research and development. But let’s assume for the sake of argument that pharma companies do need federal support to find new drugs for “Alzheimer’s and other diseases.” If that’s the case, then the argument for subsidizing pharmaceutical research should be parsed out from the question of drug price negotiation.

Refusing to allow the feds to negotiate prescription drug prices effectively creates a subsidy for drug companies…something I would think that Zandstra and Zycher would be against, at least in principle. But maybe not.

But if conservatives are in favor of government subsidies for drug companies, they need to make that argument stand on its own and separate it from the question of price negotiation. Government subsidy of drug R&D should be a separate question, complete with its own line-item and its own policy analysis.

If you’re like most Americans, the answer is probably “No.” Faced with loss of market share and declining revenues, Ford announced a restructuring plan that would cut nearly a quarter of its workforce and close 14 plants over the next six years. The moves are intended to bring the auto giant back to profitability by 2008.

What has caused the competitiveness of Ford to plummet? It’s part of the larger trend among American automakers. Ford’s “Way Forward” plan was preceded by GM’s flirtation with a “cloud of bankruptcy” and was followed by DaimlerChrysler’s announcement of layoffs (many of which would be in Germany).

NBC Nightly News featured a story on the U.S. auto industry’s woes on Tuesday night (Netcast available here). Patriotism is being replaced by pragmatism, says NBC’s Anne Thompson.

MSNBC’s Roland Jones writes, “Like its U.S. rival GM, Ford has struggled in recent years with a loss in U.S. market share to Asian rivals, a decline in sales of its large SUVs because of higher gasoline prices and a crippling healthcare bill and pension costs for its U.S. workforce and retirees.”(more…)